Ask the Chefs: "Who Will Win the Future — The Small, the Mid-sized, or the Big Organization?"

This month’s “Ask the Chefs” entry posits a question that touches on a number of potential themes — scale, agility, disruption, marketshare, negotiating power, future planning:

“Who will win the future — the small, the mid-sized, or the big organization?”

Answers from the Chefs are posted below in the order in which they were received. Again, nobody saw each other’s answers, and I wrote my answer before receiving anyone else’s answer, so this is purely a list of discrete responses.

Kent Anderson: I think the big organization that organizes itself, behaves, and seems to its audience to be a small, nimble organization will win the future. There are behaviors one assigns to each category, with “big” equating in my mind to bureaucratic, slow, out of touch with its customers, and lacking innovation. Small companies tend to be highly driven by their customers, haven’t yet developed arthritic decision-making of bureaucratic institutions, and must innovate to survive. Look at Procter & Gamble or 3M as industrial/commercial models of “big acting as small” — they subdivide into market segments and subsegments, and their push for innovation is baked into their cultures. Amazon feels like a small company still, as does Apple — hungry, innovative, nimble. Facebook is big, but feels personal. Patch.com is growing quickly by leveraging local talent and incentives. By being or becoming big, these companies have a lot of advantages small companies don’t — economies of scale, huge bargaining power, strong capitalization options, and experienced management. So the only way to survive in my view if you’re now big is to act small, and if you’re now small is to get big. And if you’re in the middle, don’t get smaller.

Joe Esposito: There is an ambiguity in the question: Are we talking about today’s “Bigs” or the “Bigs” of tomorrow? Of course, the Bigs will prevail; that you can count on. But it is not foreordained that the large and successful companies of today will be market leaders in the years ahead. The big will prevail because the Internet lends itself to a concentration of power at fewer and fewer nodes on the network. This was beautifully expressed several years ago by Clay Shirky in an essay on power laws and Weblogs. It is sometimes assumed that because the Internet lets a lot of people talk, everyone finds an audience, but in fact audiences become harder and harder to develop the bigger a network becomes. So the organizations that can break out of the pack — separate itself from the democratic rabble of open expression — will take on larger and larger roles. We see this today, with large organizations in the content area like Elsevier and John Wiley, but even more important are the tech companies: Google, Amazon, and now Apple. There will be comparable behemoths in the future. Size matters.

Ann Michael: The future of publishing belongs to the organization that can watch, learn, and adapt. Does size prevent that or does attitude? From what I’ve observed, it’s the entrenched or the excessively confident that have great difficulty adapting regardless of their size. They often have such strong and rich histories that they find it almost impossible to separate meaningful, valuable tradition that should be preserved from outdated ideas, tools, and practices that should be jettisoned. Additionally, participation in the markets you serve is no longer optional. Without participation we lose touch with our customer and are in danger of producing “ivory tower” products that excite us but leave our customers flat. Regardless of size, some organizations find it difficult to believe they don’t already have the answers. People may believe that it’s the small company that has the advantage because they’re nimble, fresh, and unencumbered by bureaucracy, but I don’t believe that’s the case at all. The organization that will win the future is the one that puts the user first, has a collaborative yet decisive culture, can execute on its aspirations, and can adjust appropriately as the market responds.

David Smith:“At the end of every long tail there’s a big dog” – Tim O’Reilly. Aaah the future, that place we see through a looking glass darkly. Well, for the purposes of this answer, I posit that the future is digital, that winning equals global domination, and that big is defined by . . . well, I’ll define big a little later. The digital world is a strange place, one that our primate brains don’t fully understand yet, even though we’ve created it. Digital things love to replicate, you have to try really hard to stop them doing so. Digital things also tend to be connected to other digital things; nodes of information on a network of connections, a network that is constantly reconfigured by the actions of the people using and sharing those digital things. Digital things from the future can be used to reconfigure the properties and information content for things from the past. And the whole digital world doubles in size and complexity about every 18 months or so. The organisations that can get to grips with this, understand it, leverage it, and monetise it will win. They’ll have to be agile. But will they have to be big? Agility and size tend to correlate inversely. You might think Google is big, but is it? 28,000 employees, yes that’s big, but then those 28K do serve some 365 billion searches per year. Facebook has about 2,000 employees and serves 800+ million users. In a digital world, a relatively small number of people can serve essentially the entire connected population of the planet. Now let’s look at it in terms of market domination: Search Engine Market Share – Google 80%+ Yahoo 6%, Bing 4%; Social Network Market Share – Facebook 60%, Youtube 20%, and Twitter 1.5%. It’s early days yet, but there seems to be a law emerging in digital economics. If you “win” you win really big. You absolutely utterly dominate the environment you are in. Clay Shirky wrote about this back in 2003 (http://shirky.com/writings/powerlaw_weblog.html). And here’s the thing; the VC funded/start-up/big data/network effect/user generated content/web2.0/social graph boys and girls totally understand what a Zipf curve is. So does Amazon for that matter (the Zipf curve basically explains their entire strategy on eBooks). They also understand that the gold is to be found in cracking the problem buried in the power law curve; how to surface the hidden, quality digital items that for whatever reason didn’t get to rise to the top (see http://www.nytimes.com/2007/04/15/magazine/15wwlnidealab.t.html for a discussion on this). So, to answer the question, relatively small, agile organisations can/do/will utterly dominate huge sections of the digital environment. They’ll acrue, and therefore control access to, vast collections of digital things. And there won’t be much left over for the rest of the players. Still, it’s not like the digital world is a stable environment, so there will always be the opportunity to be the next big dog. Just ask Apple. Now then, where’s my Ono-Sendai?

David Wojick: As a hard-nosed analyst I find this question obscure, so I will enjoy seeing how our more imaginative Chefs answer it. I cannot imagine what “winning the future” means, except perhaps either surviving or thriving. If it means surviving then I am sure that some will and some won’t, in all three size groups. If it means growing, then the small outfits have an advantage, as always, just because they are small. But this has nothing to do with scholarly publishing per se. What is fun about scholarly publishing is that there is such an enormous range in sizes. Instead of one size fitting all, all sizes fit, now and in the future.

Phil Davis: Because of their economies of scale, big organizations will dominate the future of publishing. Yet, their size and profitability will make them slow to identify and react to new opportunities, allowing small organizations to find and exploit new niches. Realizing their growth potential, big organizations will move to acquire the small, leaving an unfilled gap for medium-sized organizations.

David Crotty: I’m going to suggest this is a trick question. If the future belongs to you, then you will inevitably become a big organization. The companies now dominating the landscape — Facebook, Google, Amazon, Apple, etc. — were all small startups at some point. The next small startup that drives a new behavior or activity will grow as well. We live in an era where the social nature of any product is increasingly important. This, combined with the growing success of aggregators points to markets that will coalesce around a small number of sources due to network effects. Big organizations also have a habit of snatching up smaller organizations that show promise (see Google’s purchase of YouTube as an example). So the short answer is “big organizations,” but not necessarily the ones we know now.

Tim Vines: The future depends on the cost of transportation, and hence on the price of fossil fuels. Large manufacturing organisations will find it hard to maintain global supply chains and still sell mass produced goods if the price of fuel increases dramatically. The future may well therefore be local, small, and comparatively primitive. Large services organisations do not face this kind of supply chain challenge, but one has to wonder how much demand there will be for complex data management services if it’s hard to get a computer. The optimists point to human ingenuity and ongoing discoveries of crude oil to maintain supplies and keep the price down, but as we’re talking about ‘the future’ this isn’t a long term strategy. Aside from that, the future belongs to the big corporations — the ever rising cost of winning elections means that their priorities will come first when governments set the regulatory environment and dole out public money. The good news? Maybe a big corporation will invent jetpacks.

Rick Anderson: The short, glib version of my response is “it doesn’t depend on the size; it depends on the organization.” Speaking more specifically from a higher-education context, I think the slightly less glib version of my response is that the organizations that win will be of two categories: the first is those that are “too big to fail” (where “big” can be translated as “so deeply rooted in the culture and so richly endowed that their survival is functionally guaranteed”). The second category is those that are (pardon the cliche) nimble. That second category, I think, has two subcategories: those that are nimble in response to changing circumstance and flexible (where “flexibility” refers to a willingness and ability to question core assumptions and values) and those that are nimble and inflexible. Nimbleness alone characterizes a minority of institutions; the nimble-and-flexible group is even smaller. In libraries, which are fundementally conservative organizations, the challenge of nimbleness can be overwhelming–and true flexibility is very rarely manifest. I believe that this fact poses a potentially existential threat to the traditional research library, and I believe that size has little to do with it.

Kent Anderson

Kent Anderson is the CEO of RedLink and RedLink Network, a past-President of SSP, and the founder of the Scholarly Kitchen. He has worked as Publisher at AAAS/Science, CEO/Publisher of JBJS, Inc., a publishing executive at the Massachusetts Medical Society, Publishing Director of the New England Journal of Medicine, and Director of Medical Journals at the American Academy of Pediatrics. Opinions on social media or blogs are his own.

Discussion

13 Thoughts on "Ask the Chefs: "Who Will Win the Future — The Small, the Mid-sized, or the Big Organization?""

Most of the posts above assume that the future, like the past, will be dominated by innovation, including in scholarly publishing. Tim Vines, on the other hand, points to the possibility that a failure of innovation may bring on a very different future. Since scholarly publishing is a key component of the global innovation system, perhaps we should be thinking about what we can do to see that this does not happen. The future is our customer, as it were. We need to look outward as well as inward. Can we speed up progress?

Your abstract asks “Does the future belong to the small and nimble, the flexible mid-range, or the large and powerful? ”

If you are asking who wins a battle between the weak and the powerful, it is tautology. The powerful will get what they want, because that’s what the word means.

You make the assumption that big and powerful go together and the implication that weak goes with rest. Unfortunately that’s a fairly safe assumption. It is always physically possible for a big company to “act as small”, but never for a small company to act as big.

So big companies can, if they put their collective mind to it, get all the benefits of small companies AND all the benefit of being a big company. So as long as the economic structure remains much as it is in the US now, big companies will win “the future” and everything else. And “the future” means whatever the big companies want it to mean, which means it will be what whatever is to their advantage, only of value to others by accident, if at all.

Don’t read too much into the extract. It’s written as much to entice as to describe. The question put to the Chefs was as stated in the post. So you’re arguing against writerly license, not the real proposition.

As to your last paragraph, I think the big issue is “put their collective mind to it.” Many companies that gain a “collective mind” stall and stammer, and get beaten. Who was big/small 10 years ago? Borders or B&N/Amazon. Tower Records/iTunes. Yahoo!/Google. AOL/WordPress. Big companies also have pressures small ones don’t, especially if they’re public — quarterly earnings reports, stockholders with short-term expectations, and so forth. If they embrace reinvention and disruption as core assets, big companies can thrive. But they tend to get protectionist and are therefore big targets. The Border and B&N story is instructive. Both were big bookstore chains, but one embraced both online book sales and e-readers, at least to an extent. That one survives today, while the other is gone.

Your argument has a huge IF in it — one that many companies can’t overcome. And they have a lot of things smaller predators want. They court a lot of risk.

Yes I was talking about the come-on! Some of the answers implied the same but didn’t have it as succinctly.

I see the source of failure of the great American experiment as the failure of the founders to appreciate evolution — which is understandable given the timing. I don’t mean evolution as in “what to teach in schools”, or narrowly biological evolution. The evolution algorithm acts on everything. It acts on organizations, just as much as organisms.

You say “Many companies that gain a “collective mind” stall and stammer, and get beaten.”. Absolutely true. The winners will be the ones that don’t.

Look back over the history of business and you will see the evolution of the business organism. There was a time when the US government could beat a monopoly – Standard Oil – chop it to bits — except that it now the biggest company in the world with a new name – Exxon Mobile. But it took awhile. AT&T’s break up will be mended soon. IBM avoided breakup it but was seriously hurt for a while. Microsoft parried the antitrust suit, and now the US govt is toothless.

Corporations have evolved from an organizational artifact brought into existence to serve a particular need of people- distinctly constrained in time and purpose – to potentially immortal beings, with greater power than any person, and no purpose other than it’s continued existence.

The “Innovator’s Dilemma” showed a problem with the successful companies surviving technology change — but now every business knows the problem and some will be successful solving it. Others will emulate the successful ones. Every time a business fails, all the others have the opportunity to learn how not to repeat the failure. And some will.

It’s just evolution, and it shows that we the people have been out-evolved by our own artifacts.

So the winners will be “big”, until there is structural shift in the environment that disadvantages being “big”.

When the expression “Too Big to Fail” was first used I thought it meant that there is a size of organization that is so big it’s failure would be catastrophic … so we should not allow them to be that big …. but it seems it’s means “.. so we should not let them fail” … which guarantees the future goes to organizations that are “big”.

“Too big to fail” struck me (and continues to strike me) as an unfortunate term, one that indicates a misunderstanding of the economic risks in play in 2008. Many “big” firms failed — Bear Stearns failed, Merrill-Lynch was absorbed by Bank of America, and so forth. The injection of cash into the system by the government occurred not because these firms were “too big,” but because they were positioned relative to the economy in a manner that put them at the head of many, many rows of dominoes. The same for the auto industry firms that were floated loans.

In the financial sector, when the impossible happened — short-term lending became more expensive than keeping the money, or “broke the buck” — only an injection of capital could restore the balance. If that hadn’t happened, no short-term lending to businesses of any size would have occurred, the economic engine would have seized up, and we’d be in bread lines today. So TARP and other government actions were to stop the national economy from failing. But at the same time, AIG, Bear Stearns, Merrill Lynch, Wachovia, and other “big” firms took a pummeling. Many failed, or became shadows of their former selves. Their position in the market was what mattered, not their size. The same for the auto makers — if GM had stopped making cars because of a short-term financial problem, the cascade effect on parts manufacturers, dealerships, and other downstream would have devastated entire cities and towns. Meanwhile, other “big” companies didn’t get or need any help — Ford, Amazon, Google, IBM, 3M, DuPont, J&J, etc. All are huge, but none had a crucial position in the economic problems at the time.

So, in my opinion, “too big to fail” is “too simple to make sense.” It was more complex, which is actually reassuring. If it were really about size, then I’d really be worried. Instead, it’s about a particular place in the economy, and that makes it addressable. If only the majority party in our Congress had a collective IQ higher than that of the average mullet.

Since I was the only one to use the phrase “too big to fail,” I have to assume that Dave’s comment is referring to my use of it — in which case, his apparent confusion about my meaning is hard to understand, since I clarified my use of the phrase with a very specific interpretation of the word “big”: “so deeply rooted in the culture and so richly endowed that their survival is functionally guaranteed.”

I also tried to make it clear that I was speaking in the context of higher education. So let me try to make my point just a little clearer: I’m referring to institutions like Harvard, Yale, Princeton, Oxford, etc. My position is not that such institutions are so big and important that we, as a society, “should not let them fail,” but rather that they are likely to “win the future” simply by virtue of their very deep roots in our culture’s self-definition and their unbelievably rich endowments. Those roots and that money make it possible (and, in my view, extremely likely) for them to survive circumstances that will kill otherwise similar institutions with shallower roots and scarcer resources. This is an “is” argument, not a “should” argument.

Dave, bear in mind that corporations are social units, invented and thriving in order to serve social purposes. They are basically like the family, tribe, nation state, or for that matter the scholarly society, all of which are social units. Corporations are social units that provide goods and services. That they outlive individuals is to be desired, not condemned.

I believe you are describing what they should be, not what they are. Or at least not what the notorious ones have become. I think your description fits my own small business pretty well. And at the level of a small business, the business doesn’t really have a lot of choice.

I like the analogy to family. Consider how a family organizes itself. They look at what they have got — time, capital, skills, interests – and they see how to use it to get what they need or want. If they see hard times ahead, they knuckle down – they constrain their wants, everyone getting a little less, perhaps, and everyone pitches in with what they can do to help.

Compare that with a corporation seeing an economic downturn. The first thing they do is layoff a bunch of their employees … making sure, as far as they can, that 100% of the pain is concentrated on a fraction of the people, and none of the pain hits the people who make the decisions.

Consider for example, IBM’s response to the impending depression. This company has vaults of cash, brilliant people, more patented brilliant ideas than any other company in the world. What did Sam Palmisano do? Did he come up with brilliant ideas how to deploy this impressive arsenal of resources. No. He made what he described as “a difficult decision” to lay off thousands of employees, and was rewarded with a $24million bonus. Does that sound like “The IBM Family” ?

Americans want jobs – preferably fulfilling and rewarding jobs. Which business has it’s goal to satisfy that need?

Dave, your example is irrelevant to my point. Social units do stupid things, but so do people. That is not the issue. Your claim seems to be that these units should not exist, which I disagree with, to say the least. Drucker said that the modern corporation was one of the greatest inventions of the 20th century, along with the car, airplane and electric power, and I agree.

Big guys in the kitchen include those on the academic end, and the libraries that serve them…At the 2011 Charleston Conference, the big guys (universities’ libraries in particular) were referred to as Titanics. The “little” and “smaller” guys (tugboats?) many a time probably want to turn them around faster…

The final plenary speaker, Brad Eden, Dean of Library Services, Valparaiso University, raised awareness of a new report circulating among university provosts that is a “must read” for academic librarians, “Redefining the Academic Library” and published by the University Leadership Council in 2011. If provosts read it as hard and fast, libraries need to be prepared…
(The talk and report are referenced here:http://www.theconferencecircuit.com/2011/11/06/the-status-quo-has-got-to-go/)

Anyone have any luck finding the “Redefining the Academic Library” report published by the U. Leadership Council? I was at Charleston, and Brad Eden said you can find it on Google, but under a different title, but I’ve had no luck with it.

Doesn’t the answer to this question depend on what type of organization you are talking about–government, or private industry, or non-profits, etc.? Is big always better no matter what type is under discussion? Even in scholarly publishing a niche publisher like Reaktion Books can succeed quite well.

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The mission of the Society for Scholarly Publishing (SSP) is to advance scholarly publishing and communication, and the professional development of its members through education, collaboration, and networking. SSP established The Scholarly Kitchen blog in February 2008 to keep SSP members and interested parties aware of new developments in publishing.

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